Monday, June 18, 2007

It is fitting that the Face Value column in the latest issue of The Economist focuses on the recent installation of Neville Isdell as the new CEO of Coke. This comes just as I read about Coke's newest commitment to preserving and restoring the world's supply of water, announced at the World Wildlife Federation's annual meeting in Beijing June 5th. Here is an excerpt from Geenbiz's story on the topic,

"We are focusing on water because this is where The Coca-Cola Company can
have a real and positive impact," said E. Neville Isdell, Coca-Cola's CEO. "Our
goal is to replace every drop of water we use in our beverages and their production. For us that means reducing the amount of water used to produce our beverages, recycling water used for manufacturing processes so it can be returned safely to the environment, and replenishing water in communities and nature through locally relevant projects."

The company estimates that it used 290 billion liters of water in its production
processes in 2006 alone. Less than half of that amount -- 114 billion liters -- ended up in bottles sold by the company. The remaining 176 billion liters were used to rinse, clean, heat and cool during the manufacturing of Coca-Cola beverages.

Clearly Coke is doing this in their own best interest. They make beverages; they need water. Considering the pressures on sources of water globally it's just good risk and operational management to conserve water and cooperate on maintaining watersheds. Coca-Cola is a powerful global brand that would like to improve its place in the market. Considering the comments in The Economist article, Coke has not been performing well lately. Mr. Isdell has much to accomplish to continue the long-term success of the company. Looking at data from Coke starting in 1975, it was a strong performer through about 1989. Since then, it has been lagging the Dow. Why not throw some weight behind what will be viewed as a socially responsible activity that should result in cost savings and better performance.

Every manufactured product uses water at some point in its creation. Eventually, every company will be faced with higher prices for water. The ones ahead of the curve will be the winners.